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One of the most important responsibilities of a business owner is to conduct operations that are compliant with all local, state, and federal laws. Of course, this includes tax law.
There are many different kinds of tax fraud. You may face harsh penalties and consequences if you make a mistake, have an error in judgment, or put your trust in the wrong person.
Unfortunately, tax fraud can spiral out of control quickly. If a business files a false tax return, the IRS treats the violation incredibly seriously– even if it’s a first offense. If you participate in tax fraud, you and your business may end up facing penalties, fines, and even arrests and criminal charges.
WHAT IS TAX FRAUD? A DEFINITION
Tax fraud is the act of intentionally falsifying information on a tax return. When someone submits false information in order to limit their tax liability, that is a form of cheating.
Examples of tax fraud include:
- Claiming false deductions
- Submitting false or inaccurate social security or tax ID numbers
- Claiming personal expenses as business expenses
- Failing to report income
- Hiding interest in offshore accounts
- Falsifying income statements (under-reporting income)
- Hiding money
- Exaggerating or inflating expenses or deductions
HOW TO AVOID ACCUSATIONS OF TAX FRAUD
The easiest way to avoid being accused of tax fraud is to avoid exhibiting any fraudulent behaviors. That may seem obvious, but what does that actually look like?
Let’s take a look at 3 strategies for avoiding tax fraud at your company.
1. BE CAREFUL WHEN CHOOSING A TAX PREPARER
When you choose a tax preparer, it’s important to find someone who is ethical, responsible, and experienced. Look for someone who specializes in supporting small businesses with their tax reporting needs.
If a tax preparer makes promises of huge returns that sound too good to be true, that should be a red flag to alert you. Every business must pay its appropriate portion of taxes. Although there are legal strategies to reduce the amount that you owe, tax preparers and accountants should not be over-promising the amount you will receive in a refund.
Related: What's The Difference Between Tax Avoidance and Tax Evasion?
2. STAY INFORMED OF IRS-RELATED SCAMS
Unfortunately, scammers often use the complexities of IRS law to manipulate, intimidate, and trick small business owners. To avoid tax fraud concerns, always remember that the IRS will never call you to threaten legal action.
Do not share your information if you get a call like this! Hang up, and report the call to the IRS.
3. PROTECT YOUR RECORDS
Record keeping is a vital part of tax preparation and filing.
This involves maintaining meticulous employment records, as well as sales slips, receipts, invoices, deposit slips, canceled checks, and paid bills.
You also need to keep all of your tax records for 3 years, in the event of an audit.
As much as possible, maintain digital backups of your files. Hiring a qualified bookkeeper will help with this, too!
GET THE ACCOUNTING SUPPORT YOU NEED FROM CHALIFF + ASSOCIATES
Accounting is complex, and the tax code is constantly changing. Even so, the IRS expects you to maintain full compliance with every piece of the tax code.
With such high stakes, we understand that staying on top of your books is one of your most important responsibilities. But accounting and tax compliance can monopolize a large amount of your time!
Hiring Chaliff + Associates to manage your accounting, bookkeeping, and tax needs is your best strategy to maintain tax compliance while alleviating your own stress. Let us do the work of keeping you compliant so you can focus on running your business.
WE CRUNCH THE NUMBERS SO
YOU CAN FOCUS ON BUSINESS GROWTH
